Results: Mark Fitzgibbon, managing director of nib, says the Australian health insurance market is as "soft" as he can recall, with household incomes not growing and plenty of competition. Picture: Marina Neil

FOOTING the bill for a growing number of public hospital admissions is a key factor in swelling private health insurance premiums, nib’s Mark Fitzgibbon says.

Nib’s revenue has risen to $1.1 billion in the first six months of this financial year, the health insurer’s half-yearly results have revealed.

The Newcastle-based company announced an underlying operating profit of $96.4 million amid its results on Monday, representing growth of 8.9 per cent compared to the previous June to December period.

Mr Fitzgibbon said the company had “pulled back” on its profitability of their Australian Residents Health Insurance (ARHI) market in recognition of affordability issues and pressures on consumers.

“Our main business is ARHI, and it made $66.3 million in this half. That was down 10 per cent on the previous half,” Mr Fitzgibbon said. “Our pricing increase this year is the lowest in 15 years.

“We have compensated for pulling back that profitability with our adjacent businesses – nib New Zealand, travel insurance, international workers and students insurance – and those businesses are doing particularly well. They account now for almost a third of our total earnings as a company.”

Mr Fitzgibbon said private health insurance was “absolutely” propping up the public health system.

He said private health insurers had collectively paid more than $1.5 billion to public hospitals in the 2017 calendar year.

“It would be armageddon if the private health system wasn’t here,” he said.

“We are taking pressure off the public hospitals in two ways, by avoiding hospital admissions in the first place, and in 24,000 cases – just in this half – actually paying for people in public hospitals at a cost of almost $39 million. That grew by 5.9 per cent.

“The growth in us paying for public hospital admissions is a key factor in cost and premium inflation.

“We want our members to have rapid access to hospitals and world class care, but it remains a challenge for us to price in that cost shift, particularly when you have politicians running around saying that they want to cap premiums at 2 per cent.”

The half-yearly results show the premium revenue for nib’s ARHI increased by 9.1 per cent, but Mr Fitzgibbon said that was tempered by the number of claims paid out, which had increased by 9.7 per cent.

“We are reducing our level of profitability in our ARHI business, we are listening to community concerns about premiums and affordability, but for our shareholders, we are looking to continue to grow value in other parts of the business.”